Page:Harvard Law Review Volume 32.djvu/539

503 UPSET PRICES IN CORPORATE REORGANIZATION 503 public utility valuation in rate and eminent domain cases, the costly and voluminous engineering appraisals necessary to ascer- tain the fair value of a plant, the extremely lengthy and technical hearings, the chances of fixing a fair upset price seem negUgible. Even the earnings of the property are no gmde. Aside from the fact that to capitaUze the earnings in the case of a public utility is generally to argue in a circle, the earnings of an insolvent cor- poration, without adequate capital, are usually modified by so many circumstances — unusual expenses of receivership, tempo- rary difficulties and adversities, need of further expenditures to preserve the property — as to be of little aid. Again, it is^ot the fair value of the property that the court should seek; it is the fair valueat a forced sale, for the bondholders as a class have brought about a foreclosure and the minority cannot in fairness force the majority to consider the sale other than a forced one. In short, the confusion of theories, the anomalous conditions, the heavy ex- pense and costly htigation involved in valuation proceedings, show clearly the reasons why the courts in attempting to fix an upset value have simply guessed wildly and reached some figure. Some minority bondholders of course seek to obstruct until they acquire a nuisance value and are bought out; others act in good faith and assert their right not to be forced to go into a re- organization of which they disapprove. They desire to get some of their money back and seek to place upon the majority bond- holders the obligation to repay them. Obviously this is unfair; if the minority desire cash they can receive their securities under the reorganization and sell them on the market. But they have no right to insist that the majority should buy them out, directly or indirectly; or to obstruct the majority in conserving and protect- ing the conmion security. in The advantages of enforcing majority control by refusing to fix an upset price, are even more apparent in the case of a reor- ganization — indeed the usual reorganization — where there are conflicts between the Hens of different classes of bonds. Frequently two or more pubHc utility corporations, each of which has a mort- gage outstanding on its separate property, is consolidated into a new company, upon the assets of which a new mortgage, and often